Yara International, which earlier this week flagged a quest for
acquisitions, on Friday revealed the purchase of Bunge's Brazilian fertilizer
business, boosting its prospects in what many see as a promising market.
deal, valued at $750m, will see Norwegian-based Yara acquire Bunge
fertilizer assets including 22 blending facilities, brands and warehouses.
The pair has
also entered into a long-term fertilizer supply agreement, allowing Bunge to maintain supplies to its fertilizer clients.
'Key growth market'
is a key growth market where there is significant further potential for acreage
and yield increases," Jorgen Ole Haslestad, the Yara chief executive,
"Today's agreement also creates a strong platform for future
growth opportunities within the Brazilian fertilizer industry."
Alberto Weisser, the Bunge chairman and chief executive,
said that the deal was, "a good one for both companies.
"It enables Bunge to size our fertilizer activities so they
are a more streamlined complement to our agribusiness operations and provides
Yara with a larger position in a high-growth market."
earlier this week highlighted Yara's desire for deals, particularly in higher-value fertilizer products such
as NPK, a popular fertilizer combining the main nutrients of nitrogen, phosphate
Torgeir Kvidal, the Yara
finance director, suggested the company, which has seen net debts as a proportion of
equity, fall to levels below 0.1, from a figure of 0.75 early in 2009, will exploit its low borrowing levels "to
realise well-timed profitable growth", potentially including acquisitions.
Yara said it
is targeting annual synergies from the deal of at least $25 million, to be
realized by 2014.
Yara is targeting an 8m-tonne increase in production and
joint venture sales in the six years from 2010 to 2016, due to "significant"
mergers and acquisition activity.
The Norwegian group's favourable cash position will also
enable it to carry out all merger and acquisition activity without issuing new
equity, except for the "very largest" acquisitions.
Bunge expand into
complementary value chains
which is the world's second-largest oilseed processor will retain and operate
its fertilizer terminal at the port of Santos.
The White Plains-based company has been in transition in recent years, looking for opportunities to
"increase the scale" of agribusiness and food operations and to
"further expand into complementary value chains such as sugar" while
attempting to reduce its heavy debt burden.
Bunge two years ago sold its Brazilian fertilizer assets to mining giant Vale for $3.8bn in cash while the company has invested up to $1.5bn in
acquiring Brazilian sugar mills, taking advantage of limited credit
The decision to sell its Brazilian fertilizer mine freed the group from
the "significant" capital required to develop the facility.
Bunge still has mining assets in Argentina and the US.
Yara forecast its earnings per share in 2013 would come in between
NOK20-57, depending on the margins allowed by Chinese exports.
The group a year forecast 2012 earnings of NOK28-55 per share, with
analysts currently believing Yara is on track for a NOK37.89-a-share result.
Yara shares closed up 0.6% at NOK282.20 in Oslo. In New York, Bunge shares added 1.6% to $72.89.